Accounting Treatment of Consigned Goods at Cost Price:
When goods sent to consignee by consignor it is recorded on cost price. In consignment account, all transaction or item including unsold goods are shown on cost price, so no need of any adjustment when goods shown on cost price in consignment account.
Accounting Treatment of Cosigned Goods at Invoice Price:
Generally, consignor goods sent to consignee at cost price if some profit added or goods sent on invoice price, in this situation journal entry in goods sent on consignment, opening and closing balance, abnormal loss etc. included profit because they are shown on invoice price.
To calculate correct net profit & loss on consignment, profit included in goods should be adjusted. In consignor books necessary journal entry will made.
(1) For profit, goods sent on consignment.
Goods Sent on Consignment A/ c Dr.
To Consignment A/ c
(Unrealised profit included in goods sent on consignment)
(2) Unrealised profit included in opening stock:
Stock Reserve A/c Dr.
To Consignment A/c
(3) Unrealised profit included in closing stock:
Consignment A/c Dr.
To Stock Reserve A/c
(4) Unrealised profit included in abnormal loss:
Consignment A/c Dr.
To Abnormal Loss A/ c
